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Report: More people leaving Silicon Valley

Healthy job growth resulting in housing shortages, worsening traffic

Men in Silicon Valley with a bachelor's degree earn an average of $117,000 annually, which is 50 percent ($39,000) more than women with the same level of educational attainment. This graph includes all full-time workers over age 15. Data from the United States Census Bureau, American Community Survey PUMS; analysis by Silicon Valley Institute for Regional Studies. Image courtesy Joint Venture Silicon Valley.

As the economic engine of Silicon Valley continues to churn out out jobs, mint millionaires and attract new employees, the region is increasingly buckling under the strain of the recent success, with longer traffic commutes, a soaring cost of living and a steep housing shortage frustrating business leaders and residents alike.

That's the overarching message of the 2017 Silicon Valley Index, a comprehensive look at the region that the nonprofit Joint Venture Silicon Valley released Thursday. The report shows that the area's economy, despite a slight slowdown from 2015, continues to chug along and serve as a magnet for people from all over the world. It also indicates, however, that the region's economic inequality continues to grow and that its infrastructure is grossly inadequate.

In that sense, the report is a tale of two regions. On one hand, Silicon Valley continues to experience job growth and a declining unemployment rate (which hit a low of 3.1 percent last May and stood at 3.3 percent in November). Since emerging from the Great Recession in 2010, the Valley has added 297,000 new jobs, including 45,621 in 2016. The number of tech jobs, which make up the largest share, increased by 5.2 percent last year.

While the sectors of biotech, internet and computer design enjoyed the most growth, they weren't the only ones experiencing a boom. According to the report, the region added 6,864 new construction jobs and 6,829 new health care jobs. The Valley's average annual earning reached its highest level to date last year ($125,580) and per capita income was also at an all-time high ($86,976). All these figures, the Index notes, "dwarf those of the state and the nation."

At the same time, inequality in the region is as bad as it's ever been, with some ethnic groups actually losing ground. While white, Asian and black residents saw slight improvements in per capita incomes, Hispanic or Latino residents and those identifying as "multiple and other" saw their earnings dip.

The Index also noted that one out of every 12 residents now lives below the federal poverty threshold and one in 11 children lives in poverty. And even as incomes continue to rise, median wages in service occupations have actually declined by 8 percent since 2010, when adjusted for inflation.

Put in more concrete terms, 29 percent of the households in Silicon Valley "do not earn enough money to meet their basic needs without public or private, informal assistance, and this share jumps up to 59 percent for those with Hispanic or Latino householders."

Indeed, the report documents widening disparities between ethnicities, genders and residents with different educational attainments. The gap between the region's highest- and lowest-earning racial and ethnic groups increased by 40 percent in the past decade (in 2015, it amounted to about $47,000).

Even for those who don't occupy the lowest economic strata, the dream of homeownership is growing increasingly out of reach. The Index notes that Silicon Valley's housing costs are "crippling huge swaths of our population," with those in the lowest-paying professions suffering the most.

"The median sale price of homes in Silicon Valley reached $880,000 in 2016, a price fewer than 40 percent of first-time homebuyers can afford," the Index states. "Furthermore, only a small share of recent housing permits were affordable for low-income residents."

According to the Index, the percentage of new residences designated as "affordable" has dipped over the past year. In 2015, there were 1,758 such homes approved, making up 16 percent of the total number of new residential units. In 2016, the percentage dropped to 7 percent, with only 1,404 residences across the region designated as "affordable."

The report also indicates a growing gap between residents with graduate or professional degrees and those without them. While the median income for those on the highest strata of educational attainment went up by $3,578 between 2014 and 2015, it actually went down over the same period for those with lower levels of education. As a result, those at the highest tier earned about $86,000 more (or 4.8 times as much) as those at the bottom. This disparity is somewhat higher in Silicon Valley than in San Francisco (where the ratio is 4.5) and significantly higher than across the nation (3.2).

The gender-income gap also remains a persistent source of shame for the politically liberal region. Men in Silicon Valley with bachelor's degrees earn 50 percent more than women with the same degrees. This means that a woman with a bachelor's earns 67 cents for every $1 earned by a similarly educated man. While the gap narrows slightly for those with graduate or professional degrees (in which case, a woman earns 71 cents for every dollar earned by a man), the Valley's ratio for all women working full-time (74 cents per dollar) is worse than either in San Francisco (77 cents) or California (79 cents).

The report also underscores the outsized role that immigrants play in the region's economy, a particularly topical finding at a time when the White House is pursuing more restrictive immigration policies (by a coincidence, the report was released on the same day as the national "Day Without Immigrants" strike). Forty-six percent of the region's employed residents are foreign-born, according to the Index. This includes 62.8 percent of the employers in "computer and mathematical" fields and 60.5 percent of those in "architectural and engineering."

"Historically, immigrants have contributed considerably to innovation and job creation in the region, state and nation," the Index states. "Maintaining and increasing these flows, combined with efforts to integrate immigrants into our communities, will likely improve the region's global competitiveness."

The numbers are particularly high when it comes to women who are between the ages of 25 and 44 years and who are employed in computer, mathematical, architectural and engineering occupations. About 76 percent of these women are foreign-born, according to the Index. Furthermore, the percentage of residents who speak a foreign language at home rose from 48 percent in 2005 to 51 percent in 2015 (in San Francisco it actually went down from 46 to 44 percent).

Even with the high number of immigrants, the overall population of Silicon Valley remains relatively stable. In fact, one of the more striking findings in the new report is the growing number of people who left the Valley last year.

The "out-migration" in the Valley was greater in 2016 than in any other year since 2006, the report notes, with about 20,000 people departing for other parts of the state and country last year. This is a sharp break from just three years ago, when the region was showing more people coming in from other parts of the country than leaving. And birth rates in Silicon Valley have declined by 13 percent since 2008 (in California at large the drop was even more significant at 14 percent), dropping to their lowest levels since the mid-1980s.

And while population continues to grow, the rate slowed markedly last year. From 2010 to 2015, Silicon Valley had experienced population growth of about 34,000 per year. Between July 2015 and July 2016, it slowed to a gain of 19,000, according to the Index. With more people leaving the Valley than coming in, the growth was almost entirely due to natural growth (births minus deaths), according to the Index.

The report also highlights one key problem that continues to unite people of all backgrounds: worsening traffic. According to the new report, since 2005 there has been an increase of 228,000 Santa Clara and San Mateo County residents who commute to work, along with 57,000 additional commuters who come into Silicon Valley from San Francisco and Alameda counties. As a result, commute times have risen by 17 percent.

According to the report, the worsening commute since 2015 has added 35 hours of driving time per commuter annually (or 40 minutes weekly). The growing congestion comes despite the slight drop in commuters who drive alone to work (which went from 75 percent in 2010 to 73 percent in 2015) and an small uptick in the number of people who relied on public transportation (which increased from 5 percent to 6 percent between 2010 and 2015).

Joint Venture CEO and President Russell Hancock said in an introduction to the Index that the pace of growth in 2016 slowed down "ever so slightly," with the region losing a percentage point in the rate of job growth. Hancock noted that the market has made "necessary corrections to some overvaluations" and the region saw fewer IPOs this past year (nine in 2016, compared to 16 in 2015 and 23 in 2014). Yet he he also pointed out that there is "no talk of a bubble bursting." If anything, he wrote, "the talk is about the toll our growth is taking on the region as we move into robotics and artificial intelligence."

Hancock also acknowledged that the region's growth "has its perils."

"It strains our infrastructure, decreases our quality of living and puts housing out of reach for too many," Hancock wrote. "Growth can also be troubling when it isn't widely shared. Unfortunately, our report shows that income disparities are more pronounced than ever, changing the character of our region and raising profound questions about community and cohesiveness."

While the report highlights the steep challenges facing the Silicon Valley (which is defined as San Mateo County, Santa Clara County, Scotts Valley, Fremont, Newark and Union City), Hancock pointed to the "growing recognition that these challenges ultimately erode our innovation ecosystem and threaten the very foundation of our prosperity." He alluded in his introduction to Measure A and Measure B, which county voters approved last fall to support new housing and transportation improvements, respectively.

"Our region's storied innovation has served us so extremely well in the commercial realm," Hancock wrote. "Now, with the stakes so high, we need to apply that same spirit of innovation to our social and civic challenges."

Comments

9 people like this

Posted by resident
a resident of Old Mountain View
on Feb 22, 2017 at 10:33 am

How can there be a housing shortage if residents are leaving in droves? Alternative facts?

Posted by hsnpoor
a resident of another community
on Feb 22, 2017 at 3:18 pmhsnpoor is a registered user.

I, for one, am getting more than a little weary of the tech company party line that immigration drives innovation. Close to 60% of tech company employees are foreign born and we're supposed to just nod our bobble heads as if this is OK? This ridiculous propaganda is contributing to high unemployment rates and a failing economy. I find this mindset that American born citizens are incapable of getting the job done both insulting and unacceptable and think it's past time that people speak up and say so!

Posted by Bored M
a resident of Cuesta Park
on Feb 22, 2017 at 4:43 pm

@hsnpoor, I think you missed the point on those sorts of comments. Without the abilities of those 60% that value will be captured elsewhere in the world. The US has some terrific folks that are born here and also immigrated here. There is a wide variety of talents and this country has done a great job in unleashing those abilities.

I'm not sure how you got to failing economy and high unemployment rates. I work in a tech-ish business and jobs are everywhere. And, personally I like competition. If anyone can do the job better and/or cheaper, that's fine by me... I'll do something else and find a way to succeed.

Posted by dude
a resident of another community
on Feb 22, 2017 at 5:44 pm

Well, the housing shortage is a side effect of the building restrictions we have in the Bay Area. I am not saying we shouldn't have them, I am saying that if you severely limit where you can build housing, you are constraining supply and you know the rest.

On the one hand it is very nice that we have large areas of undeveloped land and the Bay Area doesn't look like LA. The big tradeoff is that there is not enough space to build housing close to where people work. So, they must buy houses farther away which causes our freeways to clog up.

Posted by The Business Man
a resident of Another Mountain View Neighborhood
on Feb 22, 2017 at 6:40 pmThe Business Man is a registered user.

The report is attempting to simplify a very complicated picture, my observation is this.

This report does not in fact distinguish contract workers from full employees. The typical breakdown in the valley is there are 65% workers who only have 6 to 12 month contracts. I have a Human Resources Business degree, and my opinion for what it is worth is that contractors must be reclassified to accurately report economic stability. Since they are not employed by anyone indefinitely, only temporary. This creates a very big illusion regarding what the real employment pictures are in the economy as a whole. The fact is these people will be back being unemployed by design, they are constantly told that it is a temp to perm, but it never transitions. Most economists don't even want to touch this subject.

So the claim that the Valley economy is stable can be questioned. If these contractors only reside for 6 to 12 months at a time in the valley, they have no incentive to stay. As an example, I have to stay here, but I get job offers from everywhere on the earth (literally Japan, Kuwait, Afghanistan), even though my Resume clearly states my only choice to work is in the valley or San Fran. No recruiter seems to even bother to read my first lines of text.

I had 2 college friends who went with me to a local CSU, but they moved away last year even though the husband was never having any problems with employment, it all came down to cost of living. He chose to move to Texas, where even though he earns 20% less cash, his cost of living is 38% less, he got a raise of 18% earnings, his own house, and a better work life situation.

This situation is not simple, but the smarter of the people who work here do not intend to stay here. They make their big checks, to save the money, they sometimes live in their cars, vans, truck, rvs or even tents, and when done move away. This is a employment turnover. As long as the valley gets new people coming in, like H1B visa employees, it is ok. But when the people thinking about working here question the worth and decide not to come, or if Trump cuts off the H1B visa program, the valley is in for a serious implosion.

Why do you see so many tech firms talking about the H1B Visa program now. It has been a TEMP program where they can get 100% value of the worker, but only pay about 75% the price, and they simply do not care if the worker stays. The H1B TEMP is just like a waiter, you use them for your meal, then leave them without a job after.

So is it a simple situation, NO, are the problems more complicated for the future of the valley, YES.

The High Speed Rail will solve the commute and housing problems and create thousands of GREEN jobs for latino workers as well as others seeking construction, service and infrastructure employment. Check out this site for breaking news !

Posted by lets be honest
a resident of another community
on Feb 23, 2017 at 7:18 am

If you says that those who cannot afford to live here should leave, you imply you support a market based economy. If that is the case, let the market build more and more varied housing. It's intellectually dishonest to artificially restrict supply, and at the same time, blame those who suffer from the housing shortage. Our government is the problem, not the people who work hard to make a living in the Valley. Worry about the effects of extra people, build more infrastructure, don't ban growth.

Posted by We collectively started the fire
a resident of another community
on Feb 23, 2017 at 9:23 am

To address some of the comments above. It is far more complex than simply thinking in terms of handover.

Suppose that there are 100 apples.
Tomorrow, 3 more apples may appear, making it 103.
For now, we only have 100 apples, because the problem is already apparent with 100.
Let's begin.
All 100 apples are in someone's hands.
1 person has combined their apple with the one next to it.
10 people want to sell theirs and leave the table.
30 people want to buy an apple.
10 people buying apples don't even use it. They just needed to buy something as an investment.
10 apples don't belong to people who are at the table, or in the area.
25 people have already made their apple shinny to make it cost more.
10 people buying are only in it to make shinny apples, not cheap ones.
40 people don't want to grow more apples due to fear and anger.
15 people who have apples at the table couldnt afford their apple, so everyone chipped in.
40 people at the table have apples, but can't afford the next bite.
3 apples are stuck in paperwork.
2 apples are just sitting there with no one using it.
1 apple is being turned into a pie.
1 apple is made of pure gold.
1 apple is rotten, or destroyed by nature, and under repair.
The crowd is now so large you can't even reach your apple on the table.
Everyone agrees, "NO PINEAPPLE!"

Posted by The Business Man
a resident of Another Mountain View Neighborhood
on Feb 23, 2017 at 1:52 pmThe Business Man is a registered user.

We collectively started the fire,

“Suppose that there are 100 apples.

Tomorrow, 3 more apples may appear, making it 103.”

WE STILL HAVE ONLY 100 APPLES

“All 100 apples are in someone's hands.”

OK WE HAVE 100 APPLES

“1 person has combined their apple with the one next to it.”

WE STILL HAVE 100 APPLES

“10 people want to sell theirs and leave the table.”

OK WE STILL HAVE 100 APPLES

“30 people want to buy an apple.”

OK WE STILL HAVE 100 APPLES

“10 people buying apples don't even use it. They just needed to buy something as an investment.”

OK THEN WE NOW HAVE 90 APPLES (100 APPLES SUBTRACTED BY 10)

“10 apples don't belong to people who are at the table, or in the area.”

WE STILL HAVE 90 APPLES

“25 people have already made their apple shinny to make it cost more.”

WE STILL HAVE 90 APPLES

“10 people buying are only in it to make shinny apples, not cheap ones.”

WE STILL HAVE 90 APPLES

“40 people don't want to grow more apples due to fear and anger.”

WE STILL HAVE ONLY 90 APPLES.

“15 people who have apples at the table couldnt afford their apple, so everyone chipped in.”

WE STILL HAVE 90 APPLES, BUT NOW 5 ARE SPOILED BECAUSE THEIR APPLE HAS ROTTED. THIS IS ASSUMING THAT 10 OF THEM WERE AN INVESTMENT ONLY. THAT LEAVES 85 APPLES.

“40 people at the table have apples, but can't afford the next bite.”

THAT MEANS 40 MORE APPLES HAVE ROTTED, LEAVING US WITH 45 GOOD APPLES.

“3 apples are stuck in paperwork.”

THAT LEAVES US WITH STILL 45 GOOD APPLES.

“2 apples are just sitting there with no one using it.”

THAT ROTS 2 MORE APPLES WHICH LEAVES US WITH 43 APPLES

“1 apple is being turned into a pie.”

THAT CANNOT BE CORRECT, IT TAKES AT LEAST 3 APPLES TO MAKE A PIE I THINK. WE STILL HAVE 43 APPLES.

“1 apple is made of pure gold.”

WELL THAT MEANS WE LOST ANOTHER APPLE, 42 APPLES REMAIN.

“1 apple is rotten, or destroyed by nature, and under repair.”

NOW WE HAVE 41 APPLES REMAINING.

“The crowd is now so large you can't even reach your apple on the table.”

SO WHAT STARTED OUT AS 100 APPLES RESULTED IN REALITY TO BE ONLY 41 FRESH APPLES. THE ONLY WAY TO SERVE EVERYONE APPLE IS MAKE APPLESAUCE. WOW WE WENT FROM 100 APPLES TO JUST OVER 40 APPLES, WHAT IS GOING ON HERE?

Posted by Roy G. Biv
a resident of another community
on Feb 23, 2017 at 5:18 pm

Move some of the business to other parts of the Bay Area, including San Francisco, Oakland, East Bay, further inland , etc. ; which IS happening. As more apartments are built in the Bay Area, the problem will ease a bit. As people car pool more, the same. Sacramento and now LA Area will pick up the slack, as Silicon Valley expands and comes to more and more of California.

Posted by confused
a resident of Old Mountain View
on Feb 23, 2017 at 6:18 pm

I do not understand your use of graphics. The first graph you present ends in 2015 and still has a net positive, though small, increase. In other words, more people coming in than leaving. The third chart seems useless as it appears to give total hours by all commuters in a year spent driving(?) which fails to consider length of commute, number of commuters, etc. It isn't a useful chart. There must be better graphics you could have used to illustrate your points.

Posted by confused
a resident of Old Mountain View
on Feb 23, 2017 at 6:22 pm

Okay. I referred to their report, and I would say you are exaggerating in the headline if not lying. The report says, "People are moving out of Silicon Valley nearly as quickly as
they are moving in. Between July 2015 and July 2016, the
region gained 22,500 foreign immigrants, but lost 20,801
residents to other parts of California and the United States." In no way, can this be the same as your words: "More people leaving Silicon Valley" which implies more are leaving than coming in. Perhaps you meant to say that the number of people leaving is increasing which is a bit more accurate but the next line should read, but is balanced by new foreign immigrants and births.

Posted by the_punnisher
a resident of North Whisman
on Feb 23, 2017 at 6:40 pmthe_punnisher is a registered user.

I note the number type and license plates of U-Hauls towing out of State Cars; I live across from a RE/MAX Realty Office. Yes, we have a few more " transplants " every year. I just wish they would leave their bad habits along with the former habitats. Learn what it means to be a true Coloradan, including the fact that every OPEN CARRY person is a personal threat to themselves. We DO have dangerous snakes ( including the two legged kind ) so be prepared.